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How do you know when you should file for bankruptcy?

bankrupt.jpgFalling into debt is easy to do but hard to admit. Most people feel a shame about having a large amount of debt, feeling like they have failed somehow. While these feelings are common, it does not mean they are valid.

People fall into debt for a lot of reasons. Hospital bills, student loans, a mortgage, or vet bills are just a few things that can cause an individual to accumulate debt. Sometimes, all these bills converge on you at once, and you feel like there is no hope of paying your creditors off. If it all becomes too much, should you file for bankruptcy?

Here are four situations in which you should consider filing for bankruptcy:

You can no longer afford your bills

Falling behind on bills for a month or two happens occasionally. However, if you find yourself unable to afford your monthly bills on a regular basis, you have a problem. Putting your bills on a credit card is only a temporary fix because you will eventually have to pay off your card. Credit cards typically have higher interest rates, so in the end, you will be paying more than you initially owed.

If you cannot afford your bills due to a major setback, consider bankruptcy. Debt that is significantly more than your income can qualify you for Chapter 7 bankruptcy. This allows you to have most of your debts forgiven.

The debt collectors have filed a lawsuit against you

Failing to make payments on your debt means it will likely get turned over to debt collection firm. Ignoring the debt collector can land you in hot water. The agency may file a lawsuit against you to try to force you to pay, and you do not want to contend with a debt collection lawsuit.

If things have gotten this bad, it may be time to file for bankruptcy. When you file, an automatic stay is put in place. This keeps your creditors from continuing to try to collect from you. This will also put a pause on a debt collection lawsuit.

Your pay is being garnished

In both Pennsylvania and New Jersey, a creditor generally cannot garnish your wages until they have filed a lawsuit against you. If a court grants garnishment, your employer must comply with the order. If it has moved this far, things have gotten serious with your debt.

You can stop garnishment by filing for bankruptcy. Again, this will put an automatic stay in place that protects you from debt collectors. However, certain types of collection cannot be halted such as income taxes or child support.

You may lose your home

Losing your home is a terrifying prospect. If you are behind on mortgage payments, your lender may decide it is time to foreclose on your house. You are generally given several warnings before these proceedings take place. If you cannot make up the payments, bankruptcy could protect your home.

If you qualify for Chapter 13 bankruptcy, you can keep your assets and create a repayment plan with your creditors. Assuming you continue to make your payments, you can prevent a foreclosure on your home.

Filing for bankruptcy may carry a stigma, but in some circumstances, it can be the best road forward and a way to get out from underneath crushing debt. If you have questions about whether or not bankruptcy is the best option for you, please contact our bankruptcy attorneys.

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